Picking winners to pick your winners: The momentum effect in commodity risk factors

Adam Zaremba (), Mateusz Mikutowski, Andreas Karathanasopoulos and Mohamed Osman

The North American Journal of Economics and Finance, 2019, vol. 50, issue C

Abstract: Is there momentum in commodity risk factors? To answer this question we study the performance of 15 commodity factor portfolios for the years 1986–2017. We are the first to document the strong cross-sectional relationship between past factor returns and their future payoffs. The factors with the highest (lowest) past returns continue to overperform (underperform). The strategy of buying (selling) long (short) sides of anomaly portfolios with the highest (lowest) past returns delivers an economically meaningful mean return and alpha, outperforming in these terms a benchmark equally weighting all of the factors. The results are robust to many considerations, including sorting periods, holding periods, implementation details, samples of factors, and subperiod analysis. The factor momentum is largely explained by the commodity price momentum effect.

Keywords: Commodities; Futures pricing; Factor momentum; Return predictability (search for similar items in EconPapers)
JEL-codes: G12 G13 Q11 Q13 Q41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818306053

DOI: 10.1016/j.najef.2019.101017

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